Earnings preview: Apple expected to report record iPad sales, first shrinking profit in a decade

Expectations are low for Apple's recently concluded March quarter, in which some market watchers believe the company likely saw its first year-over-year profit decline in a decade, despite booming sales of its iPad lineup.

On average, analysts polled by Thomson Reuters expect Apple to report revenue of $42.49 billion with earnings per share of $10.07. In comparison, a year ago the company made $12.30 earnings per share on sales of $39.19 billion.Record iPad sales are expected, while the iPhone may also reach new March quarter highs. But investors also expect Apple's profits to shrink year over year for the first time in a decade.

The last time Apple saw a year over year decline in profit was in 2003. The company will report its March quarter results after the markets close on Tuesday, followed by a conference call scheduled for 5 p.m. Eastern.

Sales of the iPhone are expected by Wall Street to be about flat from last year, but they could still set a new record. A year ago, Apple sold 35.1 million iPhones, its best-ever number for a March quarter. This year the market has a consensus expectation of 36.4 million units, which would be a new March quarter record, according to Chris Whitmore of Deutsche Bank.

Shaw Wu of Sterne Agee is less optimistic, as he believes market consensus is at 34 million iPhones ? a number that would instead represent a year over year decline. Wu himself is forecasting for Apple to have sold just 32.5 million iPhones.

However, Apple's other key product lineup, the iPad, is expected by investors to break records for the March quarter. Consensus calls for Apple to have sold between 18 and 19 million iPads, according to Wu, which would be a significant increase from the 11.8 million Apple sold a year ago.

As for the Mac, Wu said market consensus is calling for 3.8 million to 3.9 million units. Apple's March fiscal 2012 quarter saw sales of 4 million Macs.

Tuesday's earnings report will be of particular interest to investors because it will be the first time the company discloses its sales under its new, more realistic guidance strategy. After giving the market overly conservative guidance for years, the company announced in January that it it had overhauled how it would forecast upcoming quarters.Tuesday's earnings will mark the first reported by Apple under its new, more "realistic" guidance.

The changes were made in an effort to thwart what had become excessively enthusiastic analyst expectations. Apple's previous guidance reflected numbers the company felt it had a reasonable chance to exceed, while the new guidance instead reflects what company officials believe Apple is likely to achieve.

Back in January, Apple guided sales of between $41 billion and $43 billion for the March quarter.

Apple's guidance for the following June quarter could also be telling. The company has yet to launch a major product in 2013, and many investors are eagerly awaiting the company's next moves, with some speculation that a new fifth-generation iPad could launch in the near future.

Speculation has also suggested that Apple will launch its next handset, a so-called "iPhone 5S," earlier than in the past few years. Some reports have pegged an "iPhone 5S" launch for July, which would be less than a year after the September 2012 debut of the iPhone 5.

Finally, there's also the question of how much potential bad news is already "baked in" to Apple's stock price. Some believe if Apple's March quarter earnings miss estimates, investors won't be surprised and the stock may not take much of a hit.

The company's stock price first dipped under $400 last week after a key component supplier reported weak results for the March quarter. Shares of AAPL have tumbled more than $300 from their highs seen last September, ahead of the iPhone 5 launch.

Comments

So ... Apple will perform at the upper end of their own forecasted range, while analysts have been touting all kinds of rubbish to manipulate the stock. Maybe investors will learn to simply follow Apple's guidance from now on ...

So ... Apple will perform at the upper end of their own forecasted range, while analysts have been touting all kinds of rubbish to manipulate the stock. Maybe investors will learn to simply follow Apple's guidance from now on ...

In the past several years, Apple had the spring release of an iPad to help expectations stay high. Unfortunately, this year there does not seem to be any consensus as to when next gen iPads are due and logic says the fall refresh was implemented to plan for a longer than usual winter. With the unexpectedly great year ago quarter to compare to, I think the stock is going to tumble some more unless Apple beats the upper end of its guidance. The businesses they have continue to do well with two cautions: 1) the iPhone does not compete well in the prepaid market. I think, even in the US, the prepaid market is the future. 2) Apple does not compete in the larger screen phone arena at all. If you believe the forecasts for increased iPad sales, that comes largely from offering more than one size of device. What if Apple stopped insisting (wrongly) that one size iPhone is best for all?

I have never seen so much pessimism about a company right before earnings. Having sold all my AAPL higher, I bought some back today. Will buy more tomorrow. I expect $500 at least very soon. Gotta have faith in Tim Cook and other managers. They are the best in the business. Wall Street is stupid.

Has there ever been a more undervalued big cap stock than AAPL in the history of the stock market?

AAPL's current price is a total joke, and Apple continues to lead the way in profits and has the best customer satisfaction in the entire industry.

Apple owns the entire tablet category. The iPad is so dominant that everybody else is just fighting for crumbs, which is not really that surprising, since the iPad is the only true original, and everybody else just makes inferior copies. The iPad is also a big reason why traditional PC sales are declining.

Apple's OS X desktop and laptop machines continue to do extremely well VS. the rest of the PC industry. They are the gold standard and nothing else comes close.

The iPhone 5 is the top selling phone in the US and Apple hold three positions out of five on the top five chart. iPhones continue to remain in extreme demand, and the most recent iPhone launch on T-Mobile was "Gangbusters", according to the CEO of T-Mobile.

AAPL should be at around $1000 now, IMO.

And it's also time to start investigating illegal activity by known criminal entities such as Samsung, which is intentionally attempting to manipulate the price of shares of Apple, by repeatedly planting false stories in the media (Hello Digitimes!), that is reprinted by other sites, including this site, AI. That is my theory.

Problem is Apple has set the bar so high even above average performance is considered a loss by many. Until Apple comes out with a whole new (not the mini which is a redesign of existing) and highly successful product line post SJ era, analysts and similar will be reticent on the company.

Wall Street loves companies overleveraged. Gives all those clowns the shakes because Apple has no problems like this, thus they are difficult to pin down. All they can do to control AAPL is float lies and misinformation through back channels (analysts) to influence the stock by inciting panic or greed in clueless investors.

I have never seen so much pessimism about a company right before earnings. Having sold all my AAPL higher, I bought some back today. Will buy more tomorrow. I expect $500 at least very soon. Gotta have faith in Tim Cook and other managers. They are the best in the business. Wall Street is stupid.

The trouble is that 'investors' are stuck with the AAPL motto of 'buy on rumor, sell on news,' so this won't end soon. AAPL stock is stuck in a feedback loop, fueled by 'analysts.'

It's anybody's guess as to which way the market will react. It is made up of irrational lunatics who make their decisions based on a herd mentality. Could go up. Could go down, as we've seen in recent earnings.

This is just a wild guess, but people who invest their money in the company might be slightly interested in this topic.

As for new products, I'm not really that interested in reading any more about rumors of new phones for people who can barely afford a pair of shoes. I'll talk about new products, when the next exciting product comes along that is actually worth talking about.